The Modern CIO's Business-Focused Role: 4 Steps To ROI Heaven

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Cloud services, social networking, and big data are changing the IT investment landscape. So how do you avoid falling behind?

And how can you line up your organization to seek out new, profitable investments?

Here's your 4-step ROI checklist...

This is the second in a three-part series. Last month, we looked at research to help you maximize the value of your organization’s IT spend. This month, we’ll detail four ways that IT and the rest of the business can work together for optimum ROI.

IT cost management is a job that starts with your CIO—but it doesn’t end there. According to Gartner analysts Jim McGittigan and Sanil Solanki, there are four discrete levels where enterprises can optimize costs—starting with the IT function, but moving out to encompass the whole organization.

Solanki and McGittigan put it like this:

The two lower levels focus on the reduction of cost within IT; the two upper levels involve IT and the business teaming up to reduce operating costs. ... Since both the difficulty and value increase as you move up the stack, we often see IT leaders focusing on the first two levels. However, it is essential to engage the business and optimize the top two levels in order to provide the most significant impact and truly optimize IT costs.

Poisoned Low-Hanging Fruit

The value-optimization endeavors that are self-contained and easiest can be contained within the IT function.

But there’s a clear danger in focusing on just one department’s ability to influence the value of the organization’s technology spend: Higher-value changes require organization-wide commitment. And fear of large changes often hampers that cohesive effort.

Communication is key. If your organization is going to maximize the value it makes from its IT spend, then all business functions must understand their roles in the process.

Last month, we looked at the challenging questions that CIOs should be asking about their performance. And next month, we’ll look at the tools you can use to identify and prioritize the best-value investments.

But this month is all about collaboration.

Working Together: Joint Business And IT Savings

How do you bridge the gap between IT and the rest of the business? There are 4 essential steps:

The first step is to ensure that the channels of communication between IT and the business are operating effectively. Last time, we talked about the importance of “horizon scanning” by your CIO and how it’s essential CIOs scan the correct part of the horizon. Regular reviews of business priorities are essential if your CIO is to bring the best opportunities to the attention of the business.

Secondly, it’s essential to engender trust between IT and business. It’s essential to understand the cultural and division-specific response to risk—particularly in global organizations.

Thirdly, it’s also essential to foster a culture that supports learning. Organizations such as Google, Amazon and NetApp pride themselves on a culture that favors learning over blame. As a result, everyone in the organization has both the right and the responsibility to bring innovative ideas to fruition, fail fast, and learn from mistakes.

Finally, its essential to spot the opportunities presented by new technologies. For example, the State of California’s Natural Resources Agency saved 35% of its operating expenses and slashed its physical footprint by switching to cloud computing. This was only possible because the organization as a whole was aligned in its commitment to reducing costs while maintaining their delivery of essential services:

Big Wins Need Bold Moves: Restructuring To Reap Rewards

But those large-scale changes can require some serious upheaval.

Remember the rapid proliferation of networked technology and the way that it changed the business landscape forever 20 years ago? Well, here we go again...

The shift to cloud, social and big-data models of doing business are leading to more profound and rapid changes. Those organizations that are nimble enough to adopt these new ways of doing business are the ones that will thrive.

However, the choices that your organization makes will take you into unknown territory. Predicting the effects of radical restructuring takes serious analysis, say McGittigan and Solanki:

Often, cost optimization [decisions are] almost exclusively based on their potential cost savings, without regard to the effects...on customers, risk, time to implement, and the financial investment required to implement. This is akin to prioritizing new IT initiatives based only on their potential benefits, without regard to costs.

The Bottom Line

There’s a whole new frontier of technology-driven business opportunities to explore. It’s not just about cost-savings.